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Residents in the northern Southeast Alaska town pay some of the highest utility bills in Alaska - recently as high as 51 cents per kilowatt hour - in part because of the Gustavus Electric Co.'s dependence on expensive diesel fuel.

The project cannot begin until Glacier Bay National Park trades to Alaska about 1,000 acres of designated wilderness along Falls Creek, the proposed site of the project.

"Everybody was kept in the dark," Hession said, because FERC did not forewarn Alaskans of its vote.

Dick Levitt, owner of the Gustavus Electric Co., said he had no advance notice of the commission's vote. "This is a total surprise," said Levitt, who nevertheless was relieved and happy about the decision.

Hession and other wilderness advocates in Alaska and the Lower 48 claim the Falls Creek project will set a bad precedent for wilderness protection throughout the country.

They also question the economics of the project, which Levitt says will bring utility-cost reductions to his Gustavus customers within its first year of operation.

In FERC's order, drafted on Wednesday, commissioners rejected the Sierra Club's and the Hoonah Indian Association's assertions that the project would damage the national park and adjacent Native-owned lands. They noted that fewer than 150 people visit the Falls Creek area per year.

The commissioners vetoed a recommendation from state and federal resource agencies to increase the project's minimum flows on Falls Creek on behalf of its Dolly Varden trout. It would have cost the company some generating capacity.

The commissioners also erased a provision in the project's final environmental impact statement that would have required Gustavus Electric Co. to establish a $50,000 interest-bearing escrow account to clean up and pay for "unforeseen impacts on fish, wildlife and water quality."

Some additional actions are needed before the project can go forward, and the most critical is the proposed state-federal land exchange that was enabled by the so-called Boundary Act of 1998.

According to the act, negotiated by Sen. Ted Stevens, R-Alaska, Glacier Bay National Park must trade its acreage along Falls Creek, also known as the Kahtaheena River, to the state of Alaska. The potential loss to the park is 1,050 acres.

In turn, Alaska would trade to the National Park Service either state lands at Long Lake, near Wrangell St. Elias National Park and Preserve, or state lands adjacent the Chilkoot Trail near Skagway.

"We're willing to accept either," said Tomie Patrick Lee, Glacier Bay park superintendent, during a Tuesday interview in Juneau. "We've already indicated we will approve it. We're just waiting for the state to decide which lands they want to exchange," she said.

One Gustavus resident and former Glacier Bay park employee, Kim Heacox, said he felt torn by FERC's decision. Initially opposed to the Falls Creek project, Heacox said he can see both sides. One the one hand, Gustavus and other communities should eliminate their reliance on fossil fuels, he said. But the project won't eliminate the electric company's dependence on diesel.

"It would defray most, but not all of it," Heacox said, adding that his main concern is taking land out of wilderness.

Tom Mills of Hoonah, joint owner of a Native allotment and cabin less than 60 feet from Falls Creek, said that the project violates his civil rights. He noted that the federal government kicked the Huna Tlingit out of Glacier Bay when it formed the national park.

• Elizabeth Bluemink can be reached at elizabeth.bluemink@juneauempire.com.